This chapter explores enterprise systems and ERP systems (defined below) and discusses the advantages which can accrue from these types of integrated systems (as well as, though to a lesser extent, the cons). Several business processes are described in terms of an integrated enterprise system, and several SAP examples are given.
Where did SAP Get its Name?
Founded in 1972 as Systems Applications and Products in Data Processing, SAP has a rich history of innovation and growth that has made us the recognized leader in providing collaborative business solutions for all types of industries -- in every major market. The company, headquartered in Walldorf, Germany, employs more than 37,700 people in more than 50 countries, and serves more than 34,600 customers worldwide. www.sap.com
Enterprise Resource Planning (ERP) - software packages that can be used for the core systems necessary to support enterprise systems. ERP products are designed to offer integration of all of an organization's major business functions pg. 42. Check out this website for interesting links about ERP The ABCs of ERP. By the way, does anyone know why these integrated enterprise systems have such an undescriptive name? Bonus: Try to find examples of companies that provide these add on services and provide a link to them along with your defintion/description.
Third party add-ons - Complement an ERP system to provide the full range of functionality required for support of an enterprise system pg. 42
Customer Relationship Management (CRM) - software that builds and maintains an organization's customer related data ex. when you sign on to Amazon, the website will already have your billing information and browsing history so it can make purchase recommendations p. 42 SAS (Statistical Analysis Software) offers a CRM package that can be plugged into an existing Enterprise System. For more information, click here http://www.sas.com/solutions/crm/ Another example of CRM can be found at http://www.salesforce.com/company/.
Customer Self-service (CSS) - an extension of CRM that allows customers to complete an inquiry or perform a task without the aid of an employee ex. when you purchase something online p. 43 The Actuate Corporations touts itself as being the world leader in Enterprise Reporting and Performance Management. They offer a scalable system that can be seen at http://www.actuate.com/actuatework/busprocesses/customerselfservice.asp
SFA allows businesses to automate the sales process. There are numerous efficiencies that can be gained by allowing software to handle the processes of order processing, customer contact management , and inventory control. If used properly and in conjunction with a highly trained and motivated saled force, and organization can easily position themselves with a competitive advantage.
Sales Force Automation
Sales Force Automation Helping Sales to Sell More
A highly productive sales force has an enormous impact on your company's top—and bottom lines. Yet today's salesperson faces more challenges than ever before—fierce competition, dynamic deals and demanding customers. That's why better sales force automation (SFA) is critical to your success.
By choosing NetSuite CRM+, you can reap the many benefits of online SFA. NetSuite CRM+ goes beyond simple prospect management offered by other vendors and offers true customer management. With NetSuite CRM+'s online sales force automation, you can streamline your sales cycles, drive higher close rates and better serve your customers.
NetSuite CRM+ offers you the following key SFA features:
Supply Chain Managment (SCM) - helps to plan and execute the steps in an organization's supply chain including demand planning, acquiring inventory, manufacturing, distributing, and selling the product pg. 43
Product Lifecycle Management (PLM) - manages product data during a product's life, beginnning with the design of the product, continuing through manufacture, and culminating in the disposal of the product at the end of its life pg. 43-44
FrontRange Solutions is a company that provides such add on services through their GoldMine® Product Suite.
Out of the box, GoldMine helps you increase productivity, streamline sales and marketing automation, and win and retain customers by giving you the information you need to build relationships. Expand your GoldMine capabilities with a full suite of modules that enhance communication and keep your mobile employees connected.
Goldmine offers standard packages of SFA to a complete web based CRM
More information can be found by clicking on the box
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ERP Planned Purchases 2005-2006 - Study by AMR Research, Inc.
AMR Research, Inc., a premier global provider of independent analysis to supply chain and technology executives, published a report entitled "Enterprise Resource Planning (ERP) Spending in 2005-2006). This report shows that Microsoft will be taking the lead in growth in the ERP market with their Microsoft Dynamics (formerly MIcrosoft Business Solutions*) package.
This chart, compared with table 2.1 in our text on page 43, at first glance indicates that many of the current top ranking ERP service-providing companies are not experiencing the growth rates of these, perhaps, smaller companies. However, if you read the footnotes to table 2.1, you will find that PeopleSoft acquired JD Edwards & Co., then, shortly after, Oracle Corp. announced a hostile takeover of PeopleSoft. Also, Microsoft now owns Great Plains and Navision. It is clear that the top dogs are extremely concerned with competition depleating their sales.
More than 70% of organizations surveyed in the AMR study plan to increase their ERP spending in 2006 while only 4% expect a budget decrease. A Microsoft Dynamics news page states that this reflects both pent-up demand from several years of IT cost cutting and a dramatic shift in application strategy from best-of breed to single-vendor integrated suites. Improvement in the global economy is now allowing companies to shift their IT focus from cutting costs to creating revenue and improving operational efficiency.
*Microsoft re-branded its business solutions line as Microsoft Dynamics in 2005.
Where is ERP going:
To be fair, there are several indications that ERP systems are evolving past their current model:
Each of the leading ERP vendors has either purchased or partnered with an APS vendor, and is swiftly developing Internet versions of their supply chain offerings.
PeopleSoft bought Red Pepper, and indicated at one time that they would build their supply chain software on top of Red Pepper's APS system. (However, thereafter the president of Red Pepper, Monte Zweben, left PeopleSoft; PeopleSoft has purchased other APS vendors; and the rest of their system appears to be order-based.)
Oracle announced support for a Demand Flow model, which is compatible with REA and much better suited to Internet collaboration than the MRPII model. http://www.oracle.com/applications/manufacturing/
SAP broke off a relationship with i2 and then announced that they would build their own supply chain software based on components from ILOG that are compatible with REA.
BAAN bought Berclain, an APS vendor whose internal model is compatible with REA, and may be using the Berclain model as the basis for their Internet supply chain offerings. Incidentally, BAAN has always been a little different internally from the other leading ERP systems: while the others were built on top of an MRPII core, BAAN was developed from a project management system.
The APS and Demand Flow models are a lot like REA without the cash flow side. (See Eli Goldratt's Haystack Syndrome for published details of one very REA-like APS model that was a precursor to i2.) To the extent that the ERP vendors evolve in this direction, their systems will become more like REA (or at least they will become more capable of Internet supply chain collaboration).
However, unless they adopt a non-proprietary Internet standard semantic model, they will still not achieve Tim Berners-Lee's vision of revolutionized ecommerce. The Open Application Group is an attempt of the various ERP companies to move toward a non-proprietary standard for application integration, somewhat like a standard set of EAI interfaces. However, the OAG standards assume a generic ERP model, not a multi-company supply chain model. They may be useful to connect existing ERP systems to a cross-company semantic Web, but they are not capable of being the semantic Web themselves. (This is not to denigrate OAG: they did what they set out to do - develop open interfaces - and an REA semantic Web will certainly want to use them.)
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Enterprise Systems Value Chain:
Value Chain:a chain of activities performed by an organization to transform inputs into outputs valued by the customer; value is created by performing activities at lower costs than competitors or by enhancing differentiation of the product/service
Primary Activities: activities that directly relate to the product or service the business sells such as marketing, sales, production, and distribution
Support Activities: activities that provide support for the business to run but are not directly related to the product or service such as IT, human resources and accounting
The term ‘Value Chain’ was used by Michael Porter in his book "Competitive Advantage: Creating and Sustaining superior Performance" (1985). The value chain analysis describes the activities the organization performs and links them to the organizations competitive position.
Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization. Therefore, it evaluates which value each particular activity adds to the organizations products or services. This idea was built upon the insight that an organization is more than a random compilation of machinery, equipment, people and money. Only if these things are arranged into systems and systematic activates it will become possible to produce something for which customers are willing to pay a price. Porter argues that the ability to perform particular activities and to manage the linkages between these activities is a source of competitive advantage.
A typical value chain analysis can be performed in the following steps:
· Analysis of own value chain – which costs are related to every single activity
· Analysis of customers value chains – how does our product fit into their value chain
· Identification of potential cost advantages in comparison with competitors
· Identification of potential value added for the customer – how can our product add value to the customers value chain (e.g. lower costs or higher performance) – where does the customer see such potential
Organization Value System - part of a larger value sysytem that includes the value systems of both suppliers and customers
Upstream Flows: flows back to the organization's suppliers (p 50)
Downstream Flows: flows forward to the organization's customers (p 50)
Event Based Data Capture:
Who- relates to all individuals and/or organizations that are involved in the event. (p 52)
What- relates to all resources that are exchanged as a result of the event. (p 52)
Where- relates to the locations in which the event takes place, exchanged resources reside before and after the event, and the agents are during the event. (p 53)
When- relates to the time periods involved in completion of the event-including future exchanges of resources arising from the event. (p 53)
Basic Database Terminology:
Characters- a single unit of information.
Fields- the columns of the table. Each row will have several fields of data.
Records- also called a row or tuple. A record is a single data item (or a related set of data) in a table. All rows in a table are structured the same. Records are attributes pertaining to a single entity. Examples of entities include- person, place or thing or events such as sale or hiring of a new employee.
Tables- sets of data elements that are structured in rows and columns where columns are identified by a name and rows are identified by a value.
Database- a collection of logically related data designed to meet the information needs of one or more users. (Wikipedia)
ERP Modules:
(What does SAP call modules today, lets update the terminology); Check out other ERP vendor modules also.
Sales and Distribution - It involves the (1) Recording of customer orders, (2) Shipping of goods to the customer, and (3) Billing the customer. It connects with the materials management module to check the availability of inventory and to record the issue of goods. It also connects with the financial accounting module to record the sale, and to the controlling module for profitability analysis related to the sale. The shipment process includes scheduling the shipment, picking the goods form the shelf, packing the goods for shipment, and recording the shipment. The billing process creates invoices for all shipments that are ready to be billed.
Materials Management - It involves the functions related to the acquisition of goods from vendors and management of the goods while they are in stock. It involves the following: (1) Preparing and recording a purchase order, (2) Receiving the goods from the vendor, and (3) Recording the vendor's invoice. It interacts with the SD module during the processing of customer orders, with the financial accounting module to post the receipt of the goods and the vendor invoice, and also with the controlling module for analysis of the costs associated with the purchases. This also includes comparing the recieved and ordered quantities and , recording the the recipet and increasing the quantity on hand.
Financial Accounting - It plays a central role in an ERP system. It incorporates data from other modules into general ledger accounts and financial statements.
Controlling and Profitability Analysis- It handles internal accounting such as (1) Cost center accounting, (2) Profitability Analysis for sales, (3) Activity-based accounting, and (4) Budgeting.
Human Resources- It includes functions related to the following: (1) Recruitment, (2) Management, (3) Admininistration of Personnel, (4) Payroll processing, (5) Personnel training and travel, and (6) Benefits.
There are other ERP vendors that offer ERP packages for small - to medium -sized (SME) organizations, such as Great Plains and Navision. Great Plains is one of the most complete accounting systems available in the world today with 53 individual modules. For a complete listing of its modules visit: **http://www.mbsadvisor.com/great_plains/modules.htm** Navision software features every core and advanced module that you would expect to find in a mid-range or high-end accounting system or ERP product. For a list and description of modules visit: http://www.pass-port.com/newweb/PassportWebsite/Homepage/Solutions/Navision/NavisionModules.htm
ES/ERP Pros:
For enterprise systems:
Single database
Integrated system
Process orientation (vs. function)
Standardization of business processes and data, easier to understand across the organization
Faster business processes
Timely information
Better financial management
One face to the customer
Reduced inventory
Improved cash management
Productivity improvements, reduce personnel
Full and accurate financial disclosures
Improved budgeting, forecasting, and decision support
ES/ERP Cons:
For enerprise systems:
Centralized control vs. decentralized empowerment
Inability to support traditional business processes that may be best for that organization
Loss of flexibility in rapidly adapting to desired new business processes in the post-implementation period
Increased complexity of maintaining security, control and access permissions for specific information embedded in central database
Rigidity of “standardization” can impede creative thinking related to ongoing business process improvements
Enterprise Risk Management (ERM) & Internal Control under Sarbanes-Oxley Act (SOX)*
Enterprise Risk Management (ERM) is an effective way to handle SOX section 404. According to COSO, ERM is more than internal control. Its ultimate goal is the creation of value for stakeholders. In an ERM system, risk analysis provides a basis for the design and implementation of an effective system of internal control for an entire business entity. risk analysis must be conducted in all business processes: management, operation, information, and compliance. The most critical business process is the management process that focuses on strategies and objectives. It may entail strategic and decision risks. Internal control must be established to counteract this area of business risk; otherwise, financial reports will likely be manipulated. (This area of internal control has not been addressed by either COSO or the PCAOB). Risks in the operation process and the compliance process, if not detected and prevented, may also contribute to information risks. Separate internal controls are needed to control operation and compliance activities. (This area of internal control has not been emphasized by the accounting profession). Risks in the information process lie primarily with those estimates for some financial variables that are subject to manipulation. Internal control is no panacea for detecting major business problems. An effective system of internal control can provide only reasonable assurance that an entity's strategic and other ensuing objectives will be achieved.
*This is an excerpt from an article by Lin, H. and F. Wu titled “Limitations of Section 404 of the Sarbanes-Oxley Act” The CPA Journal. 76 (3): 48-53.
EDA: a notable thing happens inside or outside the organization. EDA is an approach to designing and building enterprise systems in which business events trigger messages to be sent by middleware between independent software modules that are completely unaware of each other. Event processing styles:
Stream- ordinary and notable events happen, screened for notability (ex. sales order)
Complex- evaluating a set of events and taking action
EDA uses messaging to communicate among two or more application processes. The communication is initiated by an "event", a trigger that typically corresponds to some business occurrence, for example, the receipt of an order. EDA messages can be queued and delivered later if a system connection is down, making EDA fairly resilient to failures.
EDA
Trigger is a business event which typically occurs at unpredictable times
Supports one-to-one, one-to-many, and many-to-many communications
Flow of control that is determined by the recipient, based on the message received
Supports dynamic, parallel asynchronous flows through a network of processes
Enterprise Systems
This chapter explores enterprise systems and ERP systems (defined below) and discusses the advantages which can accrue from these types of integrated systems (as well as, though to a lesser extent, the cons). Several business processes are described in terms of an integrated enterprise system, and several SAP examples are given.Where did SAP Get its Name?
Components of Enterprise Systems:
SFA allows businesses to automate the sales process. There are numerous efficiencies that can be gained by allowing software to handle the processes of order processing, customer contact management , and inventory control. If used properly and in conjunction with a highly trained and motivated saled force, and organization can easily position themselves with a competitive advantage.
||
Sales Force Automation
Sales Force Automation Helping Sales to Sell More
A highly productive sales force has an enormous impact on your company's top—and bottom lines. Yet today's salesperson faces more challenges than ever before—fierce competition, dynamic deals and demanding customers. That's why better sales force automation (SFA) is critical to your success.
By choosing NetSuite CRM+, you can reap the many benefits of online SFA. NetSuite CRM+ goes beyond simple prospect management offered by other vendors and offers true customer management. With NetSuite CRM+'s online sales force automation, you can streamline your sales cycles, drive higher close rates and better serve your customers.
NetSuite CRM+ offers you the following key SFA features:
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ERP Planned Purchases 2005-2006 - Study by AMR Research, Inc.
This chart, compared with table 2.1 in our text on page 43, at first glance indicates that many of the current top ranking ERP service-providing companies are not experiencing the growth rates of these, perhaps, smaller companies. However, if you read the footnotes to table 2.1, you will find that PeopleSoft acquired JD Edwards & Co., then, shortly after, Oracle Corp. announced a hostile takeover of PeopleSoft. Also, Microsoft now owns Great Plains and Navision. It is clear that the top dogs are extremely concerned with competition depleating their sales.
More than 70% of organizations surveyed in the AMR study plan to increase their ERP spending in 2006 while only 4% expect a budget decrease. A Microsoft Dynamics news page states that this reflects both pent-up demand from several years of IT cost cutting and a dramatic shift in application strategy from best-of breed to single-vendor integrated suites. Improvement in the global economy is now allowing companies to shift their IT focus from cutting costs to creating revenue and improving operational efficiency.
*Microsoft re-branded its business solutions line as Microsoft Dynamics in 2005.
Where is ERP going:
To be fair, there are several indications that ERP systems are evolving past their current model:
The APS and Demand Flow models are a lot like REA without the cash flow side. (See Eli Goldratt's Haystack Syndrome for published details of one very REA-like APS model that was a precursor to i2.) To the extent that the ERP vendors evolve in this direction, their systems will become more like REA (or at least they will become more capable of Internet supply chain collaboration).
However, unless they adopt a non-proprietary Internet standard semantic model, they will still not achieve Tim Berners-Lee's vision of revolutionized ecommerce. The Open Application Group is an attempt of the various ERP companies to move toward a non-proprietary standard for application integration, somewhat like a standard set of EAI interfaces. However, the OAG standards assume a generic ERP model, not a multi-company supply chain model. They may be useful to connect existing ERP systems to a cross-company semantic Web, but they are not capable of being the semantic Web themselves. (This is not to denigrate OAG: they did what they set out to do - develop open interfaces - and an REA semantic Web will certainly want to use them.)
==
Enterprise Systems Value Chain:
- Value Chain:a chain of activities performed by an organization to transform inputs into outputs valued by the customer; value is created by performing activities at lower costs than competitors or by enhancing differentiation of the product/service
- Primary Activities: activities that directly relate to the product or service the business sells such as marketing, sales, production, and distribution
- Support Activities: activities that provide support for the business to run but are not directly related to the product or service such as IT, human resources and accounting
The term ‘Value Chain’ was used by Michael Porter in his book "Competitive Advantage: Creating and Sustaining superior Performance" (1985). The value chain analysis describes the activities the organization performs and links them to the organizations competitive position.Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization. Therefore, it evaluates which value each particular activity adds to the organizations products or services. This idea was built upon the insight that an organization is more than a random compilation of machinery, equipment, people and money. Only if these things are arranged into systems and systematic activates it will become possible to produce something for which customers are willing to pay a price. Porter argues that the ability to perform particular activities and to manage the linkages between these activities is a source of competitive advantage.
A typical value chain analysis can be performed in the following steps:
· Analysis of own value chain – which costs are related to every single activity
· Analysis of customers value chains – how does our product fit into their value chain
· Identification of potential cost advantages in comparison with competitors
· Identification of potential value added for the customer – how can our product add value to the customers value chain (e.g. lower costs or higher performance) – where does the customer see such potential
Event Based Data Capture:
Basic Database Terminology:
ERP Modules:
(What does SAP call modules today, lets update the terminology); Check out other ERP vendor modules also.There are other ERP vendors that offer ERP packages for small - to medium -sized (SME) organizations, such as Great Plains and Navision.
Great Plains is one of the most complete accounting systems available in the world today with 53 individual modules. For a complete listing of its modules visit:
**http://www.mbsadvisor.com/great_plains/modules.htm**
Navision software features every core and advanced module that you would expect to find in a mid-range or high-end accounting system or ERP product. For a list and description of modules visit:
http://www.pass-port.com/newweb/PassportWebsite/Homepage/Solutions/Navision/NavisionModules.htm
ES/ERP Pros:
For enterprise systems:ES/ERP Cons:
For enerprise systems:
Enterprise Risk Management (ERM) & Internal Control under Sarbanes-Oxley Act (SOX)*Enterprise Risk Management (ERM) is an effective way to handle SOX section 404. According to COSO, ERM is more than internal control. Its ultimate goal is the creation of value for stakeholders. In an ERM system, risk analysis provides a basis for the design and implementation of an effective system of internal control for an entire business entity. risk analysis must be conducted in all business processes: management, operation, information, and compliance. The most critical business process is the management process that focuses on strategies and objectives. It may entail strategic and decision risks. Internal control must be established to counteract this area of business risk; otherwise, financial reports will likely be manipulated. (This area of internal control has not been addressed by either COSO or the PCAOB). Risks in the operation process and the compliance process, if not detected and prevented, may also contribute to information risks. Separate internal controls are needed to control operation and compliance activities. (This area of internal control has not been emphasized by the accounting profession). Risks in the information process lie primarily with those estimates for some financial variables that are subject to manipulation. Internal control is no panacea for detecting major business problems. An effective system of internal control can provide only reasonable assurance that an entity's strategic and other ensuing objectives will be achieved.
*This is an excerpt from an article by Lin, H. and F. Wu titled “Limitations of Section 404 of the Sarbanes-Oxley Act” The CPA Journal. 76 (3): 48-53.
Event-Driven Architecture (EDA):
EDA: a notable thing happens inside or outside the organization. EDA is an approach to designing and building enterprise systems in which business events trigger messages to be sent by middleware between independent software modules that are completely unaware of each other.Event processing styles:
EDA uses messaging to communicate among two or more application processes. The communication is initiated by an "event", a trigger that typically corresponds to some business occurrence, for example, the receipt of an order. EDA messages can be queued and delivered later if a system connection is down, making EDA fairly resilient to failures.